Finally, President Obama has rolled up his sleeves and starting mixing it up with the bankers. I haven’t read everything about his proposals, but I like what I hear from the initial soundbites. I hope he isn’t just pandering for votes due to the butt-whooping he took in Massachusetts this week. I hope that he means business and can bring along the lawmakers in Congress. It bothers me and excites me that it takes a political loss to get action. Bothers me cause the politicians should be looking out for their constituents all the time. Excites me cause it shows that when the people speak with a loud voice, we can make politicians jump.
Personally, I would bring back Glass-Steagall, but Obama seems to be flirting with the principles of Glass-Steagall. If you read my blog, you will quickly gather that I am a free market believer, and I don’t like regulation for regulation’s sake. But, Glass-Steagall is just common sense. Keep the depository banks separate from the investment banks.
The point of this post isn’t about Glass-Steagall; rather, I still believe the truly evil culprit is not being outed in this political tongue-lashing. That evil force is the Federal Reserve. We certainly have a right to blame the banks for this mess, but the reality is they were only acting according to the structure that exists today. This structure was created by the Fed. The purpose of the Fed is to serve as a backstop for banks. The government will tell you they are there to control inflation and effect full employment, but that is hogwash. The Fed was created to be the lender of last resort for banks that run into trouble. The very nature of the Fed pushes banks to take risks because they know the Fed will bail them out, which means we, the taxpayers, will bail them out. So can you really blame the banks? After all, if I could skydive, bungee jump, ride motorcycles, or ski jump and knew I wouldn’t get hurt, I probably would do them.
The Fed also has created this situation, as it did in the 1930s, by issuing too much cheap credit. Cheap credit allows banks to make heaps of money. Of course, it means that savers at banks get paid very little, but the Fed is only there to help the banks. They could really care less about the little people who put money in the banks.
So while I applaud President Obama for FINALLY going after the banks, I wish he would take aim at the real culprit: the Fed. We need to End The Fed.